STI:         -0.09%     to     3,120.9              KLCI:          -0.22%     to     1,825.1
JCI:         -0.64%     to     4,175.8             SET:            +2.56%    to     1,262.4
HSI:         +0.13%    to     22,712.8           HSCEI:       -0.53%     to     10,236.1
Nifty:       -0.47%     to     6,162.3             ASX200:     -0.15%     to     5,317.0
Nikkei:    -0.59%     to     15,814.4           S&P500:     +0.61%    to     1,837.9

MARKET OUTLOOK:
By Joshua Tan, Head of Research

MACRO DATA:

Eurozone
German unemployment fell for the first time in five months in December, signaling increased confidence by the nation’s companies even as pricing power in the euro area remained subdued. The number of people out of work in Europe’s largest economy decreased by a seasonally adjusted 15,000 to 2.965 million.
 

Regional Market Focus

Singapore

• The Straits Times Index (STI) ended -2.94 points lower or -0.09% to 3120.88, taking the year-to-date performance to -1.39%.
• The FTSE ST Mid Cap Index gained +0.01% while the FTSE ST Small Cap Index gained +0.23%. The top active stocks were OCBC (-1.22%), SingTel (unchanged), DBS (+0.12%), Charisma Energy (+7.60%) and UOB (-0.62%).
• The outperforming sectors today were represented by the FTSE ST Basic Materials Index (+1.41%). The two biggest stocks of the FTSE ST Basic Materials Index are Midas Holdings (+1.98%) and Geo Energy Resources (unchanged). The underperforming sector was the FTSE ST Consumer Goods Index, which declined -0.77% with Wilmar International’s share price declining -0.89% and Thai Beverage’s share price declining -0.93%. The FTSE ST Financials Index declined -0.31%.
• We said last week that the next resistance was at 3170, and a short term consolidation is likely at these levels – this is what we are experiencing this week.
• We have a longer term bullish bias due to macro fundamentals.
• Immediate supports at 3075, 3050 and 3000.

Thailand

• Thai stocks unexpectedly rebounded sharply on Tue with the SET index finishing the session up as much as 2.56% after sharp falls at the start of the year as institutional buying returned to high-dividend and big-cap stocks. 
• US equities advanced on Tue after data showed US exports hit a record high in Nov while an unexpectedly bigger-than-expected drop in German Dec unemployment rate on a seasonally-adjusted basis propelled European stocks higher. Traders were looking to the minutes of the Federal Reserve’s Dec 17-18 meeting due out tonight.
• More wild swings could be in store for Thai stocks today after foreign investors turned net sellers of Thai shares to the tune of more than Bt1bn yesterday. Political tensions are on the rise amid anti-government People’s Democratic Reform Committee (PDRC) protests against the Feb 2 election and the National Anti-Corruption Commission (NACC)’s decision to press impeachment charges against 308 former MPs and senators for their role in the passage of the charter amendment draft on the make-up of the Senate. The NACC decided not to press charges against the other 73 legislators including caretaker PM Yingluck Shinawatra. The anti-graft body would reach its final decision after all 308 MPs and senators testify over the next 15 days. Today the market will turn its focus to the Constitutional Court on the Bt2trn infrastructure loan bill. Under this circumstance, we expect Thai stocks to be choppy in range today but there is potential for a pullback due to possible bouts of profit-taking after yesterday’s sharp gains. We expect a trading range of 1240-1280 points for the SET index today.
• We expect resistance for the SET index at 1280-1300 points and support at 1250-1230 points today.

• Most Indonesian stocks finished in negative territory on Tuesday (07/01), as the Rupiah depreciated on concerns about Indonesia’s increasing imports of fuel, and higher inflation after the government raised the cost of consumer-level liquid petroleum gas.
• The Jakarta Composite Index (JCI) declined 27.003 points, or 0.64%, to end at 4,175.806. The LQ45 index slid 5.086 points, or 0.73%, to 694.472. Shares in finance sector stood out with a slight increase of 0.07%, while agriculture sector fared worst with 2.76%-drop. The Rupiah traded at 12,262 against the greenback, down almost 0.7%.
• Although the government is optimistic that inflation would meet 2014 State Budget’s target of 5.5% despite recent hike in price of 12-kg canister liquid petroleum gas, investors feared that rising costs of both fuel and gas would lead to record inflation. Bank Indonesia (BI) is scheduled to announce its latest key rate decision later in the week on Thursday (09/01), a much anticipated economic event this week in Indonesia.
• The Jakarta Composite Index (JCI) looked set for a rebound today, following an upbeat US trade balance data. We expect the JCI to advance today, and trade with near-term support and resistance at 4,151 and 4,224, respectively.

• Sri Lankan stocks gained to a near 5-month high led by large caps and banks as active local institutional investors and foreigners bought in risky assets, and analysts said the central bank's rate cut had been helpingthe positive sentiment.
• The main stock index rose 0.54 percent, or 32.08 points, to 5,977.07.
• Foreign investors bought 117.8 million rupees worth of shares on Tuesday after buying a net 22.88 billion rupees worth of stocks last year, compared with a record 38.68 billion rupees net foreign inflow in 2011. Analysts said the bourse was sustaining its upward trend and the central bank's rate cut had helped boost the sentiment.
• The central bank slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to a multi-year low of 8.00 percent on Thursday, in a move to reduce commercial banks' interest rate spreads.
• The day's turnover was 716.2 million rupees, less than last year's daily average of about 828.4 million rupees.  Shares in Ceylon Tobacco Company PLC gained 1 percent to 1198.20 rupees, while Commercial bank of Ceylon PLC rose 1.65 percent 122.90 rupees.
• The index gained 4.8 percent in 2013 after losses in the previous two years, giving a return of 2.18 percent in dollar terms. Many investors locked their funds in risk-free debentures instead of risky assets due to a sluggish bourse amid falling interest rates.    

• HSI gained 28 points or 0.13% to 22,712. CEI dropped 54 points or 0.53% to 10,236. Trading volume was HKD61.748 billion.
• HK market swung between gain and loss yesterday. HSI ended 2-losing streak on strong performance of Macau gambling stocks. But CEI was still weak and further fell to the lowest point since Oct of last year.
• Macau gambling stocks led indexes up as analysts raised target prices on strong gambling revenue growth estimate last year. Sands China Ltd (1928.HK), MGM China (2282.HK) and Galaxy Ent (27.HK) climbed 3.5%, 4.8% and 5.7% respectively.
• Sport goods shares out-performed with Li Ning (2331.HK), Anata Sports (2020.HK) and China Dongxiang (3818.HK) up 3.9-7.8%.
• Software and environmental stocks showed correction after surge recently. Kingsoft (3888.HK), Kingdee Int’l (268.HK) and CTEG (1363.HK) declined 4%, 4.5% and 6% respectively.
• Li & Fung Ltd (494.HK), the world’s largest supplier of clothes and toys to retailer, surged 9.6% as management said its performance last year was in line with target to 2011 level.
• Technically, 14-RSI was low at 36.3 for HSI, we expect HSI to have technical rebound in near-term. 250-MA at 22,606 is a major support for HSI. The next resistance and support will be at 23,000 and 22,605 respectively.

Morning Note
Company Highlights

The Board of Directors of TEE Land Limited (the “Company”, and together with its subsidiaries, the “Group”) is pleased to announce that its subsidiary, TEE Ventures Pte. Ltd., has entered into an agreement to acquire a freehold site with the building thereon (“the Property”) comprised within Lot 2236V Mukim 15 at 183 Upper Thomson Road, Singapore 574332 for a total purchase consideration of SGD45.2 million (“the Proposed Acquisition”). The said freehold site occupies a land area of approximately 1,575.6 sq m, and is zoned under the 2008 Master Plan for Commercial & Residential use with a maximum plot ratio of 3.0. The Company intends to re-develop the Property into a commercial cum residential development. The Proposed Acquisition is in line with the Group’s strategy to further expand its local real estate footprint. The Proposed Acquisition will also provide an excellent opportunity for the Group to continue riding on its proven track record and reputation in Singapore. The Proposed Acquisition will be funded by the use of IPO proceeds and external bank borrowings. (Closing Price S$0.315, -)

Singapore Technologies Engineering Ltd (ST Engineering) said today that further to the announcement made on 18 December 2013, Singapore Technologies Kinetics Ltd (ST Kinetics) has completed its acquisition of manufacturing assets, intellectual property and relevant manufacturing expertise from Ticel Equipamentos Ltda. for a final purchase consideration of BRL17.3m (approximately S$9.3m). The transaction was completed following the fulfilment of conditions precedent. This acquisition is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year. (Closing Price S$3.88, -)

Masirah Oil Limited & Partners, a subsidiary of Rex International Holding Limited’s jointly-controlled entity, Lime Petroleum Plc, has issued the attached press release today announced that it has begun drilling an exploration well in GA – South (GAS#1) located in the Block 50 Oman concession, on 30 December 2013. This is the second well in the two-well drilling programme in the concession. The prospect GAS#1 has a target depth planned at about 2,500 metres, was selected for drilling after technical evaluation and verification using the proprietary Rex Virtual Drilling technology, in addition to confirmations provided via conventional methodologies. The prospect is located in the central area of the Block 50 Oman concession. The well is being drilled using the independent leg cantilever jack-up drilling rig Aban VII. (Closing Price S$0.615, +4.2%)

Source: Phillip Securities Research - 8 Jan 2014